Recursive Thick Modeling and the Choice of Monetary Policy in Mexico.

The choice of monetary policy is the most important concern of central banks. However, this choice is always confronted, inter alia, with two relevant aspects of economic policy: parameter instability and model uncertainty. This paper deals with both types of uncertainty using a very specific class of models in an optimal control framework. For optimal policy rates series featuring the first two moments similar to those of the actual nominal interest rates in Mexico, we show that recursive thick modeling gives a better approximation than recursive thin modeling. We complement previous work by evaluating the usefulness of both recursive thick modeling and recursive thin modeling in terms of direction-of-change forecastability.Macroeconomic policy, Model uncertainty, Optimal control, Monetary policy, Inflation targeting

Regular Infinite Economies

The main contribution of this paper is to place smooth infinite economies in the setting of the equilibrium manifold and the natural projection map à la Balasko. We show that smooth infinite economies have an equilibrium set that has the structure of a Banach manifold and that the natural projection map is smooth. We define regular and critical economies, and regular and critical prices, and we show that the set of regular economies coincides with the set of economies whose excess demand function has only regular prices. Generic determinacy of equilibria follows as a by-product.General equilibrium, Infinite economies, Intertemporal choice, Uncertainty.

Publicidade digital, storytelling e transmedia narrativa: educomunicação do consumidor

The present text tries to analyze the relationships between the concept of digital storytelling applied to advertising starting from the base of the transmedia narrative. This is: how the new transmediatic narrative helps the construction of advertising discourses based on the notion of storytelling and how it establishes the bases for an educommunication of the consumer, the spectator and / or the target.El presente texto trata de analizar las relaciones entre el concepto de storytelling digital aplicado a la publicidad partiendo de la base de la narrativa transmedia. Esto es: cómo la nueva narrativa transmediática ayuda a la construcción de discursos publicitarios basados en la noción de storytelling y cómo ello establece las bases para una educomunicación del consumidor, del espectador y/o del target.O presente texto tenta analisar as relações entre o conceito de narrativa digital aplicado à publicidade a partir da base da narrativa transmedia. Isto é: como a nova narrativa transmediaica ajuda a construção de discursos publicitários com base na noção de narrativa e como estabelece as bases para uma educação do consumidor, o espectador e / ou o target

Macroeconomic News, Announcements, and Stock Market Jump Intensity Dynamics

This paper examines the effect of macroeconomic releases on stock market volatility through a Poisson-Gaussian-GARCH process with time varying jump intensity, which is allowed to respond to such information. It is found that the day of the announcement, per se, has little impact on jump intensities. Employment releases are an exception. However, when macroeconomic surprises are considered, inflation shocks show persistent effects while monetary policy and employment shocks show only short-lived effects. Also, the jump intensity responds asymmetrically to macroeconomic shocks. Evidence that macroeconomic variables are relevant to explain jump dynamics and improve volatility forecasts on event days is provided.Conditional jump intensity, conditional volatility, macroeconomic announcements.

How Far Do Shocks Move Across Borders? Examining Volatility Transmission in Major Agricultural Futures Markets

This paper examines the level of interdependence and volatility transmission in global agricultural futures markets. We follow a multivariate GARCH approach to explore the dynamics and cross-dynamics of volatility across major exchanges of corn, wheat, and soybeans between the United States, Europe, and Asia. We account for the potential bias that may arise when considering exchanges with different closing times. The results indicate that agricultural markets are highly interrelated and there are both own- and cross- volatility spillovers and dependence among most of the exchanges. The results also show the major role Chicago plays in terms of spillover effects over the other markets, particularly for corn and wheat. Additionally, the level of interdependence between exchanges has only increased in recent years for some of the commodities.Volatility transmission, agricultural commodities, futures markets, Multivariate GARCH.

Optimal Fiscal Policy in a Small Open Economy and the Structure of International Financial Markets.

This paper characterizes the behavior of debt and tax rates in a small open economy under both complete and incomplete markets. First, I show hat when the government follows an optimal fiscal policy and agents have access to complete markets, the value of the government’s debt portfolio is negatively correlated with government spending, and positively correlated with productivity and output, while output, labor, consumption and the tax rate are uncorrelated with government spending shocks. The stochastic processes followed by these variables inherit the serial-correlation properties of the stochastic process of the productivity shock. Second, I show that if agents can only buy and sell one-period risk-free bonds, public debt shows more persistence than other variables, and it is negatively correlated with productivity and output, and positively correlated with government spending. Moreover, the tax rate is positively correlated with government spending, while consumption is negatively correlated.Complete markets, Incomplete markets, Optimal fiscal policy

Explaining Taxes at the Upper Tail of the Income Distribution: The Role of Utility Interdependence

Optimal tax theory has difficulty rationalizing high marginal tax rates at the upper end of the income distribution. In this paper, I construct a model of optimal income taxation in which agents’ preferences are interdependent. I derive a simple expression for optimal taxes that accommodates consumption externalities within Mirrlees (1971) frame-work. Using this expression, I conduct a positive analysis of taxation: assuming that observed taxes are optimal, I derive analytic expressions for i) a parameter that measures the degree of agents’ utility interdependence and ii) a function that quantifies the consumption externality agents of different income impose to society. Using these expressions, I rationalize income taxes in the United States and the United Kingdom for the 1995-2004 period. I show that only a moderate amount of utility interdependence is sufficient for this. My estimations indicate that the progressivity of tax schedules may be driven by corrective considerations.Optimal non-linear taxation, relative consumption, rationalization.

On the dynamics of inflation persistence around the world

We study the dynamics of inflation persistence in 45 countries for the period 1960-2008. We use a nonparametric unit root test robust to nonlinearities, error distributions, structural breaks and outliers, many of them typical features of inflation data, and a test for multiple changes in persistence, which decomposes the sample information between adjacent I(0) and I(1) periods. We find that (1) With very few exceptions, inflation around the world rejects a unit root, (2) for several countries there is evidence of significant changes in persistence, (3) bursts and drops in the level of inflation and in inflation persistence tend to coincide, (4) these drops occurred during “the Great Moderation” and during the adoption of inflation targeting. We conclude that inflation is characterized by either a stationary behaviour throughout the sample, or by switches of the type I(0)-I(1)-I(0). For all countries in our sample, any indication of nonstationarity seems to be temporary.Inflation, Multiple persistence change, Stationarity, Unit root tests, Unknown direction of change, Monetary policy

Forecasting Exchange Rate Volatility: The Superior Performance of Conditional Combinations of Time Series and Option Implied Forecasts

This paper provides empirical evidence that combinations of option implied and time series volatility forecasts that are conditional on current information are statistically superior to individual models, unconditional combinations, and hybrid forecasts. Superior forecasting performance is achieved by both, taking into account the conditional expected performance of each model given current information, and combining individual forecasts. The method used in this paper to produce conditional combinations extends the application of conditional predictive ability tests to select forecast combinations. The application is for volatility forecasts of the Mexican Peso-US Dollar exchange rate, where realized volatility calculated using intra-day data is used as a proxy for the (latent) daily volatility.Composite Forecasts, Forecast Evaluation, GARCH, Implied volatility, Mexican Peso-U.S. Dollar Exchange Rate, Regime-Switching